Volatility
Table of contents
Volatility refers to the degree of price fluctuation in a financial asset over a specific period. In crypto, it often reflects rapid, unpredictable price swings due to market sentiment, liquidity, news, and trading volume.
Why It Matters in Crypto
Cryptocurrencies are notoriously volatile compared to traditional assets. This high volatility can create opportunities for profit but also increases risk. Traders often monitor volatility to decide entry and exit points or to adjust their risk management strategies.
Measuring Volatility
Volatility is commonly measured using tools like Bollinger Bands, Average True Range (ATR), and standard deviation. These indicators help assess the market’s current mood and forecast possible price movements.